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Metrics

LTV:CAC Ratio

The LTV:CAC ratio compares the lifetime value of a customer to what it cost to acquire them. It is the single clearest read on whether your growth is economically healthy.

What it means

You already track LTV and CAC separately. The ratio puts them in conversation. It answers one question: for every dirham you spend acquiring a customer, how many dirhams of gross value do you get back over their lifetime?

Worked example

A GCC SaaS has an LTV of AED 9,000 and a fully-loaded CAC of AED 3,000. LTV:CAC = 9,000 ÷ 3,000 = 3.0x.

Why it matters

Roughly 3:1 is the healthy benchmark for most subscription businesses. Below ~1:1 you lose money on every customer. Far above ~5:1 usually means you are under-investing in growth and leaving the market to a competitor.

Common mistakes

  • Using revenue LTV instead of gross-margin LTV — it flatters the ratio.
  • Using paid-only CAC against a blended LTV.
  • Treating 3:1 as a finish line rather than a financing decision.
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Customer Acquisition Cost (CAC)

Customer Acquisition Cost is what it costs you, on average, to win one new paying customer — total sales & marketing spend in a period divided by the new customers acquired in that same period.

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Lifetime Value (LTV)

Lifetime Value is the total gross profit you expect from a customer over the life of the relationship. Healthy SaaS businesses target an LTV:CAC of roughly 3:1.

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Payback Period

Payback Period is how many months it takes for the gross profit from a new customer to repay what you spent to acquire them. Shorter is safer — most healthy SaaS sits under 12 months.

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